Global Economic Diversification, Investment, Principles and the US

It is absurd to emphasize advanced technology when the reality of US infrastructure is that of a banana republic.

German tech company Rocket Internet SE showed much initial promise. Rocket – essentially a publicly traded ‘incubator’ of startups – has created an empire of 100 companies in 110 countries with 36,000 employees, according to the Wall Street Journal. At this point, Rocket and its portfolio of clones reflect the global tech downturn and are struggling to prove that they can be profitable.

In April, Rocket reported the combined adjusted losses before interest, tax, depreciation and amortization of eight of its major companies for 2015 at 1 billion EUR. It seems that duplicating Silicon Valley’s record is not as easy as Rocket’s management may have first conceived.

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Linda Rottenberg, author of ‘Crazy is a Compliment: The Power of Zigging When Everyone Else Zags’, examines what makes tech startups a success. Linda studied startups in Argentina, Chile, Colombia, Moscow, Malaysia and in many other cities and countries and found a common cause for success. Nurturing and advice from seasoned entrepreneurs was consistently the factor that most contributed to success.

Diversification,  Principles, Politics and Investment

We have examined the dismal failure of the Chinese R4I and will additionally examine the prospects for One Belt, One Road, in a non-democratic China, in Venezuela, Angola and elsewhere.

The welfare, quality of life and prosperity of millions depends on the sustainable investments of such countries as the US, Saudi Arabia, Qatar and the UAE. Saudi Arabia, after investing $3.5 billion in Uber, sent Deputy Crown Prince Mohammed bin Salman, who is in charge of its diversification fund, to meet with venture capitalists in Silicon Valley last month. Saudi Arabia is inviting US tech companies to invest in Saudi Arabia.

Unemployment is high among Saudi youth and attracting investments is a way of creating jobs while diversifying out of oil, on which the Saudi economy is so dependent. It occurred to me that shortly after this visit by Crown Prince Salman, Newt Gingrich, in an obvious bid for relevance and to be the Republican vice presidential nominee, proposed that any adherent to Shariah law be banned from the US.

Mr. Gingrich is clearly not aware that the huge Saudi sovereign wealth fund of the Economic Development Capital Company (EDCC) of Saudi Arabia is managed by a well-known investment firm in NYC. It is managed in compliance with Shariah law which stresses profit-sharing as compared to a return on investment in the form of payment of interest.

The ROI of the billion USD-at-a-time investments of the EDCC are routinely 80-90%. In a low interest rate environment, that ain’t hay. Moreover, this example demonstrates the vast ignorance of Mr. Gingrich and those who propose to do a better job of running the US economy.

US Infrastructure

A cursory examination of US infrastructure is revealing of where investment is needed:

– 1/3 of US roads are in poor condition

 

– < 2% of US GDP is spent on an infrastructure, whereas 10% of GDP will have to be spent to reconstruct the US transportation infrastructure

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– 1/9 of US bridges are structurally unsound

 

– 156 million Americans are affected by levees which are 100 years old and require an expenditure of $130 million a year to fix

 

– Drivers surveyed say they regularly wait three to four hours for loading and unloading at shipper docks.

 

– Our US airports should have satellite-guided and not radar-guided systems

 

– 2/3 of US freight travels by truck. Poor US roads, port and airports, result in millions of dollars in delays and inefficiencies

Conclusions

A significant part of economic diversification and growth involves attracting infrastructure investment. I consider it patently absurd to be emphasizing blockchains, artificial intelligence and augmented reality, when the reality of US infrastructure is that of a banana republic.

It is also very evident that the blockchain techies have little or no knowledge of global trade and its estimated $85 trillion in global trade flows in goods, services and FDI by 2025.

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